Australia’s Cladding Landscape – 2019 review & 2020 forecast

Australia's Cladding Landscape

A review of key events in 2019, and a view towards 2020

2019 has been a year of rising concern against relatively steady but modest progress, as Government and Industry seek to deal with the issues surrounding the use of non-conforming and unsafe building materials, particularly combustible Aluminium Composite Panels (ACPs)

Concerns this year have also included the rising cost and availability of the prescribed level of Professional Indemnity Insurance, suitability of guidelines for accountability and the lack of a consistent national approach as State Government’s take responsibility to rectify cladding risks within their respective jurisdictions.

Concerns are worsened by the downward pressure placed on builders, suppliers and consumers, as rising insurance premiums in a shrinking market have left “nearly 60 per cent of building surveyors” increasing fees to cover insurance costs, which for some have risen by “800 per cent in a single year” according to the ABC.

While state-based task forces and committees have been established to review the state of legislative and regulatory frameworks, state Governments have made repeated calls to the Federal Government to coordinate a nationwide approach to the issue, with regards to rectification, remuneration and legislation.

We’ve drawn from our team of experts and public resources to lay out what has happened across industry and Government in 2019, and what we might expect for 2020 across the cladding issue and its impact on the built-form.

Select your state for a summary of developments in 2019 and expectations for the new year or review a summary of the national approach at the bottom of this article.

2019 in review

Since the establishment of a State-wide Cladding Audit in November of 2017, The Victorian Building Authority (VBA), in cooperation with the Victorian State Government, have conducted inspections across over 2,500 buildings, delivering over 1,300 building assessments in the same period.

This undertaking has also identified, as documented across local and national media, industry publications and governing bodies, “multiple failures – in buildings, in regulation and in industry.”

Since that time, several amendments, updates and revisions have been made across state legislation (notably through the National Construction Code and ministerial orders), which aim to clarify conditions surrounding acceptable use of cladding, performance solutions, avenues to rectification and liability.

To date, more than 400 buildings of the 2500 plus inspected have been categorised as “high risk”, an additional 72 further classified as “extreme risk”.

The Andrews Government has also committed to a $600m cladding rectification fund in a bid to alleviate the impact of rectification works and corrective measures on owners and occupants.

Premier Daniel Andrews commented on the matter earlier this year, stating “These apartment owners find themselves in this situation through no fault of their own. They shouldn’t have to deal with the cost and stress that court action can mean – so we’re pursuing wrongdoers on their behalf.”

This contribution will coincide with planned “changes to the building permit levy”, aiming “to raise the other $300 million over the next five years.”

This levy will apply to new permits for buildings “valued at more than $800,000, excluding single dwellings, developments in regional Victoria and schools and hospitals. Other projects such as social housing may also be exempt.”

Victoria is currently the only state to have established a governing body, Cladding Safety Victoria, which intends to support “owners and owners corporations to help them rectify non-compliant cladding by providing support, guidance and connections to appropriately registered and qualified practitioners.”

Where eligible, Cladding Safety Victoria will “provide funding for:

  • Project management support
  • Professional design services
  • Building surveying
  • Permits and approvals
  • Building materials and rectification works”

As of December 13th, Victorian Minister for Planning, Richard Wynne, has renewed calls for Federal and Commonwealth support on the issue, requesting a nationwide ban on all Aluminium Composite Panels and to “provide a safety net for the insurance market so practitioners can obtain the right insurance and consumers are protected.”

The proposed safety net would include a national fund “to provide rectification for existing combustible cladding removal”, extending to “a national reinsurance scheme to provide coverage for new construction.”

Consistent with other states, the latest public statement from the Minister for Planning also requests the Federal Government “leads a national professional standards scheme for industry.”

The Minister has simultaneously moved to ban the non-compliant products in Victoria as an immediate measure, pending any response concerning a national approach. “We need to take these dangerous products out of the market across the country to provide clarity for industry and confidence for consumers – this is a national problem and it needs a national solution.” He said.

Tasmania has mirrored concerns across Victoria, having identified over forty buildings across the state which contain, or are believed to contain, unsafe cladding, including “University of Tasmania Accommodation, the new Parliament Square Building, Hospitals and a number of Schools.”

Following the completion of a state-wide audit of Aluminium Composite Panels, the Tasmanian State Government released their findings in January of 2018. The report stated that of the buildings identified, “42 buildings considered in the audit were found not to have any additional risk to fire safety.” The only building listed as requiring rectification works was the Launceston General Hospital, according to the State Premier’s website.

Looking towards 2020

The Victorian Building Authority (VBA) has emphasised their ongoing commitment to pursuing practitioners involved with buildings found to have made use of combustible cladding.

“Action to hold this relatively small group of the industry to account for their involvement has commenced and will continue vigorously in 2020, while architects will be referred to the Architects Registration Board for its attention.”

They anticipate that “such investigations and enforcement activity will increase in the coming year.”

Ongoing industry training and new partnerships are expected to play a significant role in “raising the standard of conduct and professionalism across the industry… [and] go some way towards directly addressing systemic shortcomings in pockets of the industry to ensure a fit-for-purpose built environment.”

Concerning the State Government’s continued commitment, the Victorian Premier’s office stated earlier this year that “The government will also review the state’s Building Act to identify what legislative change is needed to strengthen the system and better protect consumers.”

The ability for practitioners to maintain the required level of Professional Indemnity Insurance has also been a continued concern for most of the industry, extending to retiring practitioners who are encountering difficulties in obtaining runoff insurance without exemptions or special conditions.

The VBA has issued a statement supporting a national approach to resolving this issue, in particular identifying key problem areas across “increased premiums and excesses”, special conditions and exclusions in renewed policies and the decreasing availability of insurance providers.

Victoria’s building and construction industry have appealed to the State Government to “suspend prosecuting builders… in a bid to encourage voluntary reporting of affected properties.”

It is uncertain whether this appeal will be considered, however the movement has attracted the attention of the Master Builders Association, who have stated that builders are more likely to come forward with the desire “to contribute to the rectification without fear of reprisal.”

As of December 11th, the Andrews Government has commissioned an Expert Panel to review and address the Victorian Building System.

The six-member panel will convene next year, chaired by Victorian Better Regulation and Red Tape Commissioner Anna Cronin and featuring:

  • Dame Judith Hackitt – Chair of the UK Independent Review of Building regulations and Fire Safety and former Chair of the UK Health and Safety Executive
  • Lauren Solomon – CEO of the Consumer Policy Research Centre
  • Melanie Fasham – Past President of the Master Builders Association of Victoria and member of the Building Regulations Advisory Committee
  • Dr Gerry Ayers – Health and Safety Manager of the Construction, Forestry, Mining and Energy Union (Construction and General Division – Victorian/Tasmanian Branch)
  • Professor Ian Bailey AM SC – Founding Chair of the Society of Construction Law Australia and professorial fellow at the Melbourne Law School

The initial responsibility of the panel will be to “establish overarching principles to guide the building system review and identify key themes to be investigated and addressed throughout the reform process.”

This panel will also address the recommendations of the Victorian Cladding Taskforce’s July 2019 Report and the Building Confident report by Professor Peter Shergold AC and Ms Bronwyn Weir.”

2019 in review

2019 saw a continuation of the New South Wales Government’s cladding identification and rectification plans, following its establishment in July 2017 under Minister for Better Regulation, the Hon. Matt Kean MP.

The State commissioned Shergold Weir report “Building Confidence” was commissioned to “follow compliance issues in the construction industry at state, national and international levels.”

In accordance with the report’s findings, the state Government has proposed the following actions:

  • appointment of a Building Commissioner
  • overhaul compliance reporting
  • require building practitioners with reporting obligations to be registered
  • ensure that there is an industry wide duty of care to homeowners, which in effect would reverse the High Court decision of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2013] HCA 36.

The state became one of the earliest to enact a ban on Aluminium Composite Panels, implementing the policy in August this year and defining criteria for non-compliance across relevant building classes.

In line with actions of the Queensland Government, New South Wales mandated the registration of potentially affected buildings by February 22nd this year, which:

  • Are two or more storeys in height
  • Is a class 2, 3 or 9 structure
  • Utilise metal composite panels or an insulated cladding system on “any part of its external walls or another area of the building”

Similar to Victoria and Queensland, the state-wide cladding taskforce is nearing completion of the assessment of over 1900 buildings across the state. To date, recent estimates state that “over 500 buildings have been identified as ‘high-risk’”, however the state government is yet to commit to any funding plan that would assist with remedial works.

Where a building is deemed to pose an immediate risk, the NSW taskforce will instruct the relevant local Council to issue a Fire Safety Order which “where necessary, requires remedial work to be undertaken at the cost of the building owner.”

This has been cause for debate as the NSW State Government has not yet announced or committed to any funding initiative to assist with remediation.

Looking towards 2020

Following the completion of the initial state-wide cladding audit, new residential, assembly and healthcare buildings of two or more storeys are required to register with the New South Wales Cladding Portal according to the same requirements.

Although information of the cladding register has not yet been made public, it has been highlighted that clause 186U “Register of buildings that have external combustible cladding”, of the Environmental Planning and Assessment Amendment (Identification of Buildings With Combustible Cladding) Regulation 2018, makes provisions for the Planning Secretary to do so.

It is not yet clear as to whether this will alleviate concerns regarding Professional Indemnity Insurance, as hesitation across several insurance providers have been seen to be affecting progress on rectification works.

At present, the New South Wales Government, in line with other states, has implemented a temporary injunction allowing practitioners, whose policies contain cladding related exclusions or special conditions, to continue to practice while a long-term resolution is sought. The current measures only allow for continuation of practice under these Insurance Policies until June 30, 2021.

This has raised concerns within the building sector, as questions have been raised with regards to the establishment of liability in future should another cladding related incident occur, amidst other concerns over rising premiums and difficulties in obtaining a suitable policy.

Issues such as these are expected to form key concerns in future discussions over regulation and legislature between Government and leading industry bodies.

Our understanding will become more clear with the completion of a Parliamentary Report into building regulations in New South Wales, which is expected by February 14th, 2020.

According to a report by the ABC, NSW Parliament is also “currently debating a bill to create a new registration system for the industry, and to make it easier for owners to pursue damages” amid discussions to establish a separate building commission and dedicated building minister to “improve standards” in the state.

2019 in review

Queensland’s state-wide Audit Taskforce is well underway in their efforts to inspect and assess buildings and enact remediation works following the registration of over 18,000 buildings by the registration deadline of October 31st, per the building registration scheme which commenced on October 1st of 2018.

Further to this, the state Government has enacted the “Building Fire Safety (Combustible Cladding Rectification Work) Amendment Regulation 2019” as an amendment to the Building Fire Safety Regulation 2008.

This latest piece of legislation is designed to provide clarification around responsibilities for owners to “complete an online checklist to identify which buildings are affected by combustible cladding”, accompanied by the introduction of “a fee for QFES advice on combustible cladding rectification work.”

This measure also supports the implementation of the state-wide registration system “requiring private building owners to record the fire safety of their buildings.”

The document was completed following consultation with:

  • Queensland Building and Construction Commission
  • Engineers Australia
  • Australian Institute of Building Surveyors
  • Master Builders Queensland
  • Australian Institute of Architects
  • National Fire Industry Association
  • Property Council of Australia
  • Unit Association of Queensland
  • Construction, Forestry, Mining and Energy Union;
  • and the Building Products Industry Council

All building owners were required to register buildings and complete stage one of the Combustible Cladding Checklist by March 29th. Buildings which must be registered are:

  • a class 2 - 9; and
  • of type A or B construction; and
  • built or have had the cladding altered after 1 January 1994 but before 1 October 2018

The timeline for additional requirements is as follows:

  • 31 July 2019: Complete the building industry professional statement and complete the combustible cladding checklist (part 2).
  • 31 October 2019: Engage a fire engineer and register their details on the combustible cladding checklist (part 3).

Thus far, combustible cladding has been identified across more than 230 buildings across the state, including at least five state owned buildings.

It was also noted within this document that the newly introduced schedule of fees “may be serving as a disincentive to the rectification of combustible cladding.”

The Queensland Building and Construction Commission (QBCC) has also sought to ban the use and importation of combustible cladding, enacting the ban on October 23rd, preventing the use of “expanded polystyrene products used in any external wall insulation and finish (rendered) system on class 2 – 9 buildings of type A or B construction.”

Mick de Brenni, Queensland Minister for Public Works, has maintained the Government’s position regarding funding for rectification works as being the responsibility of the building owner, running counter to the Victorian Government’s announcement of their $600 Million package to combat the issue.

Looking towards 2020

The enactment of preventative measures and policies to stem the impact of non-compliant cladding and unsafe building materials has, according to Queensland Building Minister Mick de Brenni, improved the medium to long-term impact on the industry and consumer confidence, but will take time to rectify deeper issues across existing buildings.

“We say in respect of new buildings we can see a short-term achievement of very effective compliance, and in terms of buildings that already exist the identification and rectification of latent defects will take some years” he said.

It is expected that the Queensland Government “will also promote the idea of a national professional development scheme for industry professionals along the lines of the state’s own existing program.”

All building owners who have registered through the Safer Buildings portal and completed both the necessary checklist and enlistment of a Fire Engineer are expected to have completed the third and final stage of the combustible cladding checklist, building fire safety assessment and Fire Engineer statement by the 3rd of May 2021.

If the cladding is deemed “non-conforming” by the Queensland Building and Construction Commission (QBCC), owners will be required, within 60 days of receiving the fire safety risk assessment, to:

  • display a notice in a conspicuous position at the entrance to the building and near the fire indicator panel; and
  • if the building comprises 2 or more lots, provide a copy of the fire safety risk assessment to all lot owners and tenants.

With regards to a return to more accessible and affordable Indemnity Insurance, the State Government argues that the current trend “would also reverse once surveyors were part of a nationally consistent scheme that raised standards.”

“What will drive down insurance costs over time is the realisation of higher standards of conduct that will come with a professional standards scheme, where certifiers can hold themselves to account,” Mr De Brenni said.

2019 in review

Initiated under the Department of Planning, Transport and Infrastructure (DPTI) in 2017, the South Australian Government is currently in the third phase of their building audit and rectification program.

Stages one and two of the program sought to identify buildings which met necessary criteria for further investigation and compile findings across these sites. Following the completion of these respective stages, the State Government with the assistance of local councils are in the process of notifying building owners and occupants who are affected.

At this stage, building owners will proceed according to the following options:

  • replacement of the ACPs as part of the general ongoing maintenance routine
  • removal of part or all of the ACPs as a matter of urgency
  • additional alarms, escape points or sprinklers
  • placement of barriers that prevent fire spread, should an ACP catch fire.

Over 17,000 public buildings were reviewed in the initial phase of the audit, through which 126 were identified to undertake further investigation.

Of these buildings selected for further review, 52 were found to “incorporate some ACP external cladding and underwent a full Life Safety Risk Analysis.”

The State Government further commented that “Through this process, two (2) buildings were assessed as High risk. The remainder (50) were assessed as either Moderate (39) or Low (11) risk. No public-owned buildings were found to warrant a higher risk classification, e.g. High-Extreme or Extreme.”

With regards to Private Buildings, 172 were identified for review. Of these, 142 buildings in 19 council districts were confirmed to contain “some ACP external cladding and underwent a full Life Safety Risk Analysis.”

  • 96 buildings (77%) were assessed as either Low or Moderate risk;
  • 21 (17%) were assessed as High risk;
  • Seven (7) buildings (6%) were assessed as Extreme risk.

Looking towards 2020

Following the conclusion of cladding investigations, the South Australian State Government is now in the process of distributing “Life Safety risk analysis results and recommendations” to the appropriate building owners. It is mandated that they respond “to council or DPTI acknowledging the risk and potential actions proportionate to the level of risk.”

Finally, relevant Council Building Fire Safety Committees are required to “address and manage risks with private building owners.”

At present, building owners under the direction of the DPTI and Fire Safety Authorities, must undertake remediation works in the form of:

  • removing ACP from around exits;
  • removing ACP from around firefighting equipment;
  • removing ACP from the first 3 metres above ground level;
  • installation of an Active Fire System;
  • removing ACP within 1m of a balcony.

The DPTI “will monitor building owners’ responses to the Audit findings and recommendations made in the Interim Report” and “will continue to work collaboratively with owners of both public and private-owned buildings to ensure that appropriate recommended remedial or other actions are taken, relevant to a building’s SALSA risk rating that will reduce that risk to an acceptable level (i.e. Low to Moderate).”

Responsibility to ensure correct adherence to the rectification guidelines will be divided between Councils for privately owned buildings and relevant Government agencies for all public buildings identified in the Audit Interim Report.

2019 in review

Consistent with the response of State Government counterparts, the Western Australian Government expanded on the scope of their initial review of Aluminium Composite Panels (ACPs) into a state-wide cladding audit encompassing “all high-risk, high-rise buildings with cladding attached.”

The Western Australian Cladding audit involves buildings 3 storeys or higher of class 2, 3, 4 & 9 construction with cladding applied after 2000.

Managed by the Department of Mines, Industry Regulation and Safety (DMIRS) The current status of the project sollout is in phase two, stage 3 and 4 – determining which buildings require remedial works and issuing the appropriate building order, with the ability to “order that the cladding be remediated via the issue of a building order.”

DMIRS has also issued direction notices to 115 building surveying contractors concerning in progress building works. “The direction notices requested that the Building Commissioner be provided with information relating to any Certificates of Design Compliance issued by their offices from July 2017 that involved high risk buildings with cladding.”

To aid the program, the Department of Fire and Emergency Services (DFES) simultaneously issued a guide in January, instructing building owners affected by combustible cladding to “reduce the fire risk posed from existing non-compliant external cladding installed on their building, as the appropriate approach to the issue is resolved.”

This document coincides with Guideline GL-17, released on February 27, detailing the following conditions surrounding unsafe cladding:

  • Verification Methods;
  • Design and compliance with the NCC, particularly deemed-to-satisfy provisions;
  • Inherent risks associated with the use of the now banned materials;
  • Fire Brigade Intervention;
  • Testing
  • Material Properties

The Building Minister’s Forum (BMF) has also provided regular communications regarding key decisions addressing safety issues associated with “non-conforming and non-complying building products," in cooperation with the Western Australian Attorney General; Minister for Commerce John Quigley MLA LLB, JP.

As of September 19th, “remediation works had commenced on 46 (of the 52) buildings identified in during the audit process”, and the “drafting of a final cladding audit report has been commenced.”

Looking towards 2020

Following the publication of a final report, expectations are that the Western Australian Government may provide further recommendations for national regulatory guidelines per the NCC, and hand findings to Federal Government to assist in the development of a national approach to managing the issue.

Private buildings assessed as moderate or high risk will be referred to the relevant local government permit authority which has the power under the Building Act to order the building owner to engage an expert to conduct a survey and provide a report in relation to the cladding. The local government permit authority can also order that the cladding be remediated via the issue of a building order. Alternatively, some building owners may opt to remediate cladding using the building permit pathway under the Building Act.

DMIRS will continue to monitor the outcome of local government permit authority activities to ensure no building poses an unacceptable risk of fire spread due to combustible cladding. DMIRS will include updates on its fortnightly reports in relation to actions taken by local government permit authorities in response to assessments referred to them by DMIRS.

DMIRS will also continue to publish updates about the status of public buildings involved in the audit.

Additionally, DMIRS are seeking to make a number of amendments to state building legislation, based on the recommendations of the Shergold Weir ‘Building Confidence’ report; DMIRS are currently seeking industry stakeholder feedback and input on a number of proposed reforms to the building approval and assessment process in Western Australia.

The current position of the Northern Territory Government, as stated on their website, reads

“Building work in the Northern Territory must conform and comply with the National Construction Code, relevant technical standards and laws to make our buildings safe. Everyone is responsible for making sure the right products are used and applied correctly including designers, engineers, builders, assessors, buyers, sellers, manufacturers, importers and others.”

A recent statement to the ABC stated that “The Northern Territory Department of Infrastructure and Planning declined to comment on specific buildings.

The response from the Northern Territory Government commented "The NT continues to liaise with ‘the Commonwealth and other jurisdictions on its response to the combustible cladding issue, and on strategies to reduce the potential risks from non-conforming building products and materials.’”

Looking towards 2020

It is believed that, following the establishment of a national approach and supporting guidelines for auditing and identification, updates to relevant legislation, rectification and accountability, the Northern Territory will potentially seek to adopt practices under a national program as part of the region’s approach to rectification of unsafe cladding.

The National Approach

2019 in review

Discussion on the matter appears, on the whole, to be moving steadily towards a consistent understanding of the issue from a legislative point of view. However, areas of liability and accountability, among others, remain hotly debated issues throughout the building sector, Government and the general public, quickly becoming a point of frustration and uncertainty for many.

Federal Government continues to debate the long-term implications of non-compliant cladding and associated building materials, against rising pressure from State Governments, industry practitioners and regulatory bodies. Commentary has described the Federal Government as “maintaining the position that building regulation is an issue that falls squarely within the remit of individual State Governments across Australia.”

Despite the positions of State and Federal Governments, Federal Industry Minister Karen Andrews has indicated the possibility of funding a national taskforce to “achieve a common outcome”, following an initial agreement between State and Federal Governments in July to pursue a “nationally consistent approach to recommendations of the [Building Confidence] report.”

However, there is has been no stipulation that any manner of relief funding will be established in line with Victoria’s $600 million assistance package.

Looking towards 2020

In the immediate-term, we expect continued action from all levels of government in cooperation with regulatory bodies and with input from high profile and leading practitioners. This will follow the establishment of cladding taskforces and legislation governing identification and rectification works and the prohibition of non-compliant materials.

This is likely to be a greater push for a consistent and informed approach to elements of fire safety, building design, maintenance and assessment, described by some as “lax and ambiguous building standards” which have also been identified throughout the cladding issue.

The Australian Building Codes Board (ABCB) is currently taking recommendations and comments from practitioners on proposed technical updates to the 2022 edition of the National Construction Code (NCC). The current cut-off for responses is August 2020 and is likely to receive input from across the industry on amendment or clarification of regulations with regards to cladding.

Coinciding with the release of the 2019 edition of the NCC, a new Non-Mandatory Fire Safety Method was announced which will be made mandatory as of May 1st, 2020.

This is particularly important given that developments across the building sector have highlighted the gaps in accountability, amid calls for more encompassing legislation to prevent the fallout from improper construction. Proposed solutions to this matter have been a continual source of disagreement between industry and Government, who have contested one another with regards to the rectification process and, perhaps more immediately, who will be responsible for covering the cost.

Concerning the importation of now banned materials, Master Builders Victoria has recently identified to Federal Government the fact that cladding “has been brought into Australia with stickers falsely declaring it to be resistant to fire”, recommending to “overhaul the current auditing and testing system for imported products” as documented in The Age.

As an aside, a recent landmark ruling by the New South Wales Civil and Administrative Tribunal has deemed another external cladding product, known as “Biowood”, to be “an undue risk of fire spread” from “compartment to compartment via the exterior of the building” in certain conditions, and is therefore “not fit for purpose.” The Tribunal concluded that the use of BioWood as an attachment to the external walls of a building is “a major defect in breach of the statutory warranties.”

It remains to be seen how this will relate to the ongoing issues concerning Aluminium Composite Panels, however it is predicted to increase the number of buildings nationally earmarked as unsafe due to the use of non-compliant materials.

Managing safety and compliance obligations in the wake of the recent cladding fallout has become a considerable point of difficulty and expense for many building owners.

Get in touch with Hendry's expert team of advisors to devise a solution that will optimise compliance, avoid unnecessary risk or exposure to cladding and maintain the safety of your assets.

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